During the last fiscal year, the following advances were made: 1) Biological activity of stem cells In the 1970s, Freidenstein and Owen first identified a population of non-hematopoietic, adherent fibroblastic cells in marrow that had the ability to recreate cartilage, bone, the stroma that supports blood formation, and marrow fat cells, which they termed bone marrow stromal stem cells (BMSSCs); i.e., a tissue-specific stem/progenitor cell population. Later, it was proposed that BMSSCs could form other mesodermal cells types (although this does not coincide with the basic patterns of developmental biology), and were renamed mesenchymal stem cells. Subsequently, based on the similarity of BMSSCs cell surface markers with other fibroblastic cells and the use of artifactual differentiation assays, it was proposed that MSCs are ubiquitous, and equivalent in their differentiation capacity. Meanwhile, it was determined that some, but not all, sinusoidal pericytes are BMSSCs, now known as skeletal stem cells (SSCs). Therefore, it was assumed by many that all pericytes in all tissues are MSCs and that all MSCs are identical. Based on this history, there is a great deal of confusion in the field. For this reasone, we undertook a comprehensive study to study the identity and nature of MSCs from bone marrow, periosteum, muscle, cord blood, adipose tissue and amniotic fluid. Using stringent in vivo differentiation assays and transcriptome analysis, we show that these human cell populations from different anatomical sources, commonly regarded as MSCs based on non-specific cell surface markers, actually differ widely in their transcriptomic signature and in vivo differentiation potential. In contrast, they share the capacity to guide the assembly of functional microvessels in vivo, regardless of their anatomical source, or in situ identity as perivascular or circulating cells. This analysis reveals that muscle pericytes, which are not spontaneously osteo-chondrogenic as previously claimed, may indeed coincide with an ectopic perivascular subset of committed myogenic cells similar to satellite cells. Cord blood-derived stromal cells, on the other hand, display the unique capacity to form cartilage in vivo spontaneously, in addition to an assayable osteogenic capacity. These data suggest the need to revise current misconceptions on the origin and function of so-called MSCs, with important implications with regards to tissue engineering. The data also support the view that rather than a uniform class of MSCs, different mesodermal derivatives include distinct classes of tissue-specific committed progenitors of different developmental origin (Sacchetti et al, Stem Cell Reports, 2016). 2) Role in disease Hemifacial hyperplasia (HFH), also known as hemihypertrophy, can occur in isolated cases or as a part of Beckwith-Wiedermann syndrome, Proteus syndrome, and a number of others. The cellular mechanisms involved in HFH, are not well understood. With our collaborator, Dr. Stephen L-K Yen, University of Southern California, we established bone marrow stromal cells from HFH bone and compared them for cellular and molecular differences to cells from normal bone of the same patient. Hyperplastic bone marrow stromal cells developed showed a twofold difference in cell size and cell number compared to those derived from the patients normal bone. Microarray data suggested a 40% suppression of PTEN (phosphatase-tensin homolog) transcripts. Sequencing of the PTEN gene and promoter identified novel C/G missense mutation (position -1053) in the regulatory region of the PTEN promoter. Western blots of downstream pathway components showed an increase in PKBalpha/Akt1 phosphorylation and TOR (target of rapamcyin) signal. Sirolimus, an inhibitor of TOR, reversed the cell size, cell number and total protein differences between hyperplastic and normal cells. In cases of facial overgrowth, which involve PTEN/Akt/TOR dysregulation, sirolimus may be useful for limiting cell overgrowth (Yamazaki et al, Bonekey Rep, 2015). 3) Stem cells in tissue engineering and regenerative medicine In current orthopaedic practice, there is a need to increase the ability to reconstruct large segments of bone lost due to trauma, resection of tumors and skeletal deformities, or when normal regenerative processes have failed such as in non-unions and avascular necrosis. We continue to work on the development of a clinical protocol for use of bone marrow stromal cells along with appropriate scaffolds for regeneration of segmental defects. In addition, studies are underway to evaluate the use of a fibrin-based scaffold for the generation of cartilage by bone marrow stromal cells that does not undergo hypertrophy. This would mark a significant advance in moving towards the clinical application of bone marrow stromal cells in joint disease. Lastly, based on the need to generate larger number of cells than is possible with bone marrow stromal cells, we continue to develop methods for the differentiation of human embryonic stem cells and induced pluripotent stem cells to reproducibly generate bone and cartilage.